Protect the Federal-State-Local Partnership for Medicaid

The Federal-State-Local Partnership for Medicaid

Congress must support the federal-state-local partnership structure for financing and delivering Medicaid services and oppose any measures that would further shift federal and state Medicaid costs to counties—including cuts, caps, block grants and limits on counties’ ability to raise the non-federal match or receive supplemental payments.

Why it Matters to Counties

Counties play a critical in funding and delivering Medicaid services, as they help contribute to the non-federal share of Medicaid costs and operate the health systems that serve enrollees. Because counties are deeply embedded in Medicaid financing and administration, any changes to the program's funding structure or eligibility requirements have direct fiscal and operational impacts at the county level. 

• Counties may contribute up to 60 percent of non-federal Medicaid funding.
• Counties bear the financial and administrative burden of operating health infrastructure that serve Medicaid eligible residents. 
• Reforms under H.R. 1 shifted financial burdens to counties, requiring increased staffing to manage new eligibility verification processes while simultaneously driving up uncompensated care costs at county-owned facilities as residents lose coverage.

Current Landscape

• H.R.1 — Signed July 4, 2025, H.R. 1 has restructured Medicaid financing mechanisms, coverage pathways and eligibility requirements, shifting significant administrative and cost burdens to counties. 
• New Work Requirements — On June 1, 2026, the Centers for Medicare & Medicaid Services (CMS) issued an Interim Final Rule requiring 43 states and Washington, D.C. to implement H.R.1 work requirements for most Medicaid expansion enrollees by January 1, 2027. 
• Broader Landscape: H.R. 1 reforms significantly altered the federal-state-local partnership on Medicaid, shifting financial burden to counties. 

Downstream Effects

Failing to protect the federal-state-local partnership for Medicaid will shift costs to counties and harm residents:

• Federal cost-shifts: Cuts, caps or block grants, especially those that fail to account for rising healthcare costs, strain county budgets and reduce funds available for other local priorities.
• Increasing uncompensated care: Changes that increase the uninsured rate drive up county uncompensated care costs, as facilities must provide services regardless of an ability to pay.
• Closure of local health facilities: New limits on counties' ability to receive Medicaid reimbursements or raise the non-federal match undermine local health systems counties have built, threatening access to care for residents. 
• Growing administrative burden: Measures that increase eligibility verification requirements or limit local operational flexibility force counties to hire additional staff to comply with new rules. 

NACo’s Ask

Congress must support the federal-state-local partnership structure for financing and delivering Medicaid services and oppose any measures that would further shift federal and state Medicaid costs to counties—including cuts, caps, block grants and limits on counties’ ability to raise the non-federal match or receive supplemental payments.

NACo urges Congress to:

• Provide counties with implementation resources: Ensure counties that are involved in Medicaid eligibility and enrollment receive the resources needed to implement new requirements without passing costs to counties. 
• Prevent Medicaid cost shifts to counties: Oppose policies that increase county costs including those that cause coverage losses that drive up uncompensated care for county health systems. 
• Protect eligible residents from inappropriate coverage losses: Ensure implementation of Medicaid requirements includes clear exemptions, reasonable timelines, due process protections and coordination across Medicaid, SNAP, TANF and workforce systems. 
• Preserve the federal-state-local Medicaid partnership: Oppose cuts, caps, block grants or new limits on Medicaid financing mechanisms that would further shift federal or state Medicaid responsibilities onto counties as states implement requirements under H.R. 1.